Glossary
An equity investment typically takes the form of an owner's share in a for-profit business, and return on equity involves a share in the profits. An equity investment typically takes the form of ownership of a business entity, such as shares of stock, membership interest in an LLC, or a partnership interest in a limited partnership.
Internal Revenue Code section 4940 imposes an excise tax of 1-2 percent on the net investment income of some private foundations. PRIs are excluded from being treated as business holdings for the purpose of calculating excess business holdings subject to excise tax.
The requirements that a private foundation must establish procedures to: (1) see that a grant to an organization that is not a Section 501(c)(3) public charity or the foreign equivalent thereof is used only for the purpose for which it is made, (2) obtain full and complete reports from the grantee organizations on how the funds are spent, and (3) to make full and detailed reports on the expenditure to the IRS. Grants or PRIs for which expenditure responsibility must be exercised are disclosed on a private foundation's Form 990PF.
A term referring to a relationship in which one person owes a fiduciary duty, a high standard of care, to the beneficiary. The primary duties are the duty of care and the duty of loyalty. Directors, trustees, managers and certain other advisors of nonprofit organizations owe fiduciary duties to the organizations they oversee, similar to the duties of directors at for-profit companies. However, unlike fiduciaries of for-profit companies or pension trusts, fiduciaries of foundations and endowments owe legal duties of obedience to the organization's charitable mission and to the observation of the social purposes required of nonprofits. The fiduciaries of charitable organizations must approach investment and program-related investment decisions with these duties in mind.
Tangible property used in the operations of an organization, but not expected to be consumed or converted into cash in the ordinary course of events, e.g. facility, equipment, furniture, etc.
These securities, commonly in the form of Treasury bonds, corporate bonds, CDs and preferred stock, provide periodic income payments at predictable intervals and an interest or dividend rate known in advance by the holder. The relatively low risk of fixed income securities generally translates into relatively lower returns.
Formally a "foreclosure suit"; the procedure whereby a lender takes possession of collateral that has been pledged under a loan upon a default.
A method of grouping expenses according to the purpose for which costs are incurred. Functional Expenses include program expenses, general and administrative expenses, cost of goods sold, and financing expenses. Audited financial statements sometimes include a Statement of Functional Expenses.
Operating expenses that are not directly related to programs or the production of goods or services, including rent, utilities, insurance, and managerial salaries.
A grant is a payment to an organization for general operating support, or a specific project or purpose. Grants can include payments to exempt organizations to further the organizations’ exempt purpose. A grant can be made for any charitable purpose. Any private foundation grant to a non-501(c)(3) public charity must be made subject to expenditure responsibility. In the context of a program-related investment (PRI), private foundation funders will often make technical assistance grants to support other charitable activities related to the PRI.
Have a question, website feedback, or idea to make our services better?